Municipal Labor Demand in the Presence of Uncertainty: An Econometric Approach
The authors specify a model of municipal labor demand when resource flows available to the municipality are uncertain. The model allows them to test the hypothesis that employment decisions are rational in the sense that they incorporate all available information at the time that the decisions are made. The authors find that, for their sample of communities, on the whole one cannot reject the hypothesis that labor demand is consistent with intertemporal utility maximization under uncertainty. However, small and large communities exhibit different behavior. The employment decisions of small communities are consistent with the model, while those of large communities are not. Copyright 1991 by University of Chicago Press.
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